No more 2nd home tax write-off?

I was reading through my Pops Jan. 06 BoatUS magazine and came across the article "Tax Reform Panel Proposes Major Change in Deductions."

Has anyone heard about this?

The article in a nut shell:

A tax reform panel has proposed a complete overhaul of the U.S. tax code that would simplify the entire system and change many of the deductions that have been in effect for decades. Among the changes that would affect boaters are the elimination of the mortgage interest deduction for all second homes – which currently includes boats that meet the criteria – as well as the elimination of the deduction for home equity loan interest. The panel says that the elimination of such deductions could lead to lower overall tax rates, the elimination of the alternative minimum tax and the marriage penalty.

They've been talking about a tax code overhaul for years - including this revision. This is just part of the total proposal. I'm not saying it won't happen, but it will be few years before they successfully pass a bill with such a dramatic affect on most americans. It will get a lot more publicity as it gets more legit. with serious backers. Don't cry yet, but keep an eye on the news.... Remember, most congressmen and senators have more than one home, so this will hit everyone of them in the wallet. So, do ya really think they are going to pass such a thing??? I doubt it.

A presidential panel on tax reform has proposed a complete overhaul of U.S. tax law that would simplify the entire system but change or eliminate many of the deductions that have been in effect for decades.

The President’s Advisory Panel on Federal Tax Reform released its 271-page report in late October and it calls for elimination of the home mortgage interest deduction in favor of a Home Credit of 15% of mortgage interest paid and with a lower maximum cap, among dozens of suggested changes. Also eliminated in the plan is the mortgage interest deduction for all second homes, which currently includes boats, as well as elimination of the deductions for home equity loan interest and state and local taxes.

President Bush, in creating the panel in January 2005, asked for a tax reform plan that would be revenue neutral but encourage economic growth. The panel produced two plans: the Simplified Income Tax Plan and the Growth and Investment Plan. The major features include: simplified reporting, lower tax rates on families and businesses, elimination of the alternative minimum tax and the marriage penalty.

The panel’s rationale for proposing to cap the home mortgage interest deduction – which cost $69 billion a year – is, in part, because only 35% of taxpayers itemize their returns and 70% of tax filers get no benefit at all from it.

The second home interest deduction – available since 1986 for boats with a galley, head and sleeping quarters and financed with a secured loan, is important to boating as it treats a boat the same as a vacation condo or beach house for tax purposes. Boat owners with a secured loan on a boat have been able to deduct their interest paid annually, if they itemized their tax returns.

Marine dealers and boat builders reacted quickly to the panel’s report in November since the second home mortgage interest deduction has been an important selling factor in a harsh marine retail climate. Boat sales peaked in 1989 and have been declining or flat ever since. Within days the National Marine Manufactures Association compared the tax reform recommendations to the disastrous boat luxury tax of the early 1990s that cost the industry thousands of jobs.

“This proposal has a long way to go before it becomes law,” said Michael Sciulla, BoatUS senior vice president of Government Affairs, who lobbied for the original deduction back in the mid-1980s.

“We urge boat owners to closely review the two plans to see how the overall impact of the plan affects them,” he added.

Meanwhile, Treasury Secretary John Snow was to review the panel’s report and present recommendations to President Bush by the end of 2005. Ultimately, it will be up to Congress to take action on tax reform. The jury is still out as to whether this will happen during 2006 – an election year.

So, if I am reading this correctly we will now only be able to deduct 15% of our interest paid on our first mortgages, nothing on our second mortgages and nothing at all on second homes and boats considered second homes?

But, they plan on lowering taxes accross the board? So, us homeowners that do itemize will be paying more in taxes while renters and people that don't itemize will be getting a tax break?

I am a small business CPA, used to teach grad tax school some, and have written many articles about this.

First, it was all grandstanding, something to keep your eyes off the real ball, which is excess government spending. Given a government that is going to spend 50% of GDP, which is about what government does, we have the simplest, and most efficient system available, it is also the fairest.

I know, someone will want to bicker about that, but remember, I am NO fan of taxes, but once you understand the whole thing it is the way it is because it can be no other way.

They talked about a "flat tax" but we want to tax businesses, and there is no way to make it flat and simple.

They wanted a sales tax, but the rate would have to be 34% to be revenue neutral, which would drive to much business underground.

They talked about eliminating the progressive rate structure, where we pay more % based upon more income, but then the poor people would have to pay tax.

They talked about a Value Added Tax, and thank God this was stopped because it gives to much power to government, but if they did, small businesses would simply go underground.

So in the end we have what we have, and it will not change in our lifetime, granted they may tinker under the hood, but until we get rid of massive government spending we will never get rid of massive tax compliance cost.

Wish I had better news, but this whole schite about changing the tax code is simply a diversion from the real issue, which is serious overspending by government. If they can get us to focus on something that can never change we betch about that instead of focusing on taking away their right to steal our money and waste it playing god. They being congressmen and senators.

If they can get us to focus on something that can never change we betch about that instead of focusing on taking away their right to steal our money and waste it playing god. They being congressmen and senators.